Unless your business is to provide the same product, without variation, at the same cost of production, there is no fast, simple answer to the question...'What Does It Cost?'

By Johnny Duncan

There is one question that sign company owners, installers, and even the company receptionist are asked more than any other. Salespeople hear it in phone calls, at the end of their presentations, and at industry conventions. This question causes most to cringe every time it is uttered. The seemingly simple question is: 'What does it cost?'

Unless your business is to provide the same product, without variation, at the same cost of production, there is no fast, simple answer to this question. One of the most important elements of your business is the estimation phase of the project. This is the one crucial factor that determines your company’s profit.

What is estimating?
An estimate is a calculation of the quantities of various items of work, and the expenses likely to be incurred. The total of these probable expenses to be incurred on the work is known as ‘estimated cost’ of the work. The estimated cost of a work is a close approximation of its actual cost. The agreement of the estimated cost with the actual cost will depend on accurate use of estimating methods and correct visualization of the work, as it will be done. Importance of correct estimating is obvious. Under-estimating may result in the client getting an unpleasant shock when bids are opened and drastically modifying or abandoning the work at that stage. Over-estimating may lose the prospect, or in any case, his confidence.

Estimating includes determining what materials and in what quantities will be required for the work so that the arrangements to procure them can be made. It also includes determining the number and kind of workers of different categories who will have to be employed to complete the work in the specified time. Finally, estimating includes the consideration of the amount and kind of equipment needed to complete the work as well as using past experience to estimate quite closely the length of time required to complete an item of work or the work as a whole.

A good estimator should possess a systematic and orderly mind. He must also have the ability to collect, classify and evaluate data, and of course, a sound knowledge of his segment of the sign industry.

The frustration
If you've ever prepared a cost estimate for a project, you know that you can lose sleep over it. Did you think of everything? Have you uncovered the true complexity of the project? You can reduce anxiety by following a process that answers these questions and results in concrete and measurable information on which to base your estimate.

First, you need to define the project thoroughly. Then, you can calculate project hours using formulas and other historical information from previous projects. Finally, you need to assess the risks of changes that affect your estimate and adjust it accordingly.

A certain amount of analysis and planning needs to be done before you can estimate the work effort involved. Learning about the audience and the system is the first step. This research will enable you to determine the project scope and prepare an outline of each deliverable.

After you've calculated hours for each line item in your estimate, look at the hours in the context of your project. Your goal is to determine whether the hours you've estimated are sufficient for the circumstances.

Headache reduction
All of this takes valuable time away from you that you could be dedicating to other projects. Thankfully, there is hope and help in the various products available to help guide you through the estimating process.

“The sign industry’s need to estimate quickly and effectively is more important today because of the growing competition. Automated software lets you create quotes and email or fax them immediately in a professional style, not just “handwritten” notes,” states Terry Miller, President of Activity Software. Automating the process not only eliminates the need to pour in hours of time completing an estimate, but also takes out the worry that you may have miscalculated your figures. Of course, as you know, “garbage in is garbage out.”

Changes in our industry have created more demand for instant estimates and faster service. “I think the biggest change that has happened with sign estimating is demand from external sources. Our economy is good and construction is booming and the need to produce more estimates with a shorter turn around time is growing all the time. This is putting a huge strain on sign companies, especially smaller custom shops,” says Joe Arenella of SignTacker, located in Austin, Texas.

Most of the difficulty of estimating can be eliminated simply by getting back to the basics. As Arenella puts it, “As a sign company owner with sales over $7 million, I feel the biggest challenge is organization, organization, organization! The key to successful estimating is organization and consistency. There is nothing worse than handing a customer a quote for a sign on a store front and a month later quoting a second location with the same variables yet have the price be 20% higher. A methodical and organized system for estimating projects and submitting customer quotes will help alleviate the problems with estimating a custom constructed product, and help keep customers happy by keeping pricing consistent, and help grow a profitable company.”

Sign estimating software helps you to become better organized. It is a tool that will prompt you to look at all angles of an estimate. We all forget things and an estimating software program will walk you through the estimating process while reminding you to look for every possible project expense. Then, it assists you in calculating the project. You will become faster in your estimating and faster estimates equates to quicker awarding of projects and better customer service.

I can remember that, as a young boy, using a Crescent wrench as a hammer. I won’t go into to detail as to what my father did to me, but let me just say that it was several hours before I felt like sitting again. Think of the estimating software as a tool as any other tool in your shop. It is there when you need it and designed specifically for one purpose.

Still to come
Sign estimating is an evolving process. Before the computer, new and better ways to estimate “by hand” were being introduced. Now, we are fortunate to have estimating software and processes that are continually upgraded and improved. According to Arenella, “Sign estimating will always be a challenge. There are a limited number of estimating tools available that can really assist in standardizing estimating methods. These issues will continue to be a challenge over the next five years, but the continued development of estimating software, ERP systems, and the growth of national sign companies that have similar costing structures will help.”

With the ever-changing technology, it is also becoming more affordable for sign companies of all sizes to purchase estimating tools. The future is wide open for using newer technology to your advantage for estimating jobs of every size. “The World Wide Web is the sales place of the very near future. This means not only giving your customers a chance to order on-line but giving you the ease of electronically creating a purchase order from a vendor list and invoice, tying the two together and getting faster results,” states Terry Miller. “With our web-order modules, like Business On-Line, PO and Vendor Maintenance, and the ability to track open orders with Shop Floor, everyone, staff and customer, can know in an instant that their needs are being answered.”

If you are getting bogged down with too much time dedicated to estimating without results, it may be time for your company to consider investing in an estimating software tool. There are several companies today that provide good estimating software. A few questions to ask the vendor you choose is: Does your company provide ongoing support to help us through the learning curve? Does your company provide upgrades that can be purchased to keep up with the times? Finally, some companies will provide a trial period with a money-back guarantee. You may not desire to send the software back, but this is a nice feature offered by some and you should find out if your vendor provides it.

To contact Joe Arenella at SignTracker, go to www.sign-tracker.com or call 512-358-0999. To contact Terry Miller at Activity Software, go to www.activitysoftware.com or call 877-237-9478